While we all hope to live long, prosperous lives, none of us are guaranteed tomorrow. Accidents, illness, death, and other unforeseen events occur every day. That’s the main reason that it’s necessary to have an estate plan in place. An estate plan enables you to leave crucial instructions regarding what will happen to your children, property, and health care if anything were to happen to you. Statistics show that 74 percent of American adults consider estate planning a confusing topic. While this is understandable – estate planning is complicated, and it can seem overwhelming if you’re not familiar with it – it’s also regrettable, as many people ignore it until it’s too late. If you don’t have an estate plan, and are wondering why you need one, our experienced Texas estate planning attorney can help you answer the critical question, “Why is estate planning important?”
What Is Estate Planning?
Estate planning involves organizing your affairs legally. The objective of an estate plan is to designate beneficiaries, ensure that your possessions will pass to them when you pass away, outline how you will get medical care and what decisions will be made for you if you can’t make them for yourself, indicate who will care for your minor children (if applicable). While making a will is an essential component of this process, it’s not the only document you need; other crucial tools (such as trusts, powers of attorney, and advance directives) are needed to protect your assets and loved ones. An estate planning attorney can help you understand your options and personalize your plan to your unique needs.
Reasons Why Estate Planning Is Important
If you don’t understand the answer to the question “Why is estate planning important?”, you won’t realize that you need to create an estate plan now, while you still have time to do so. Here are some of the reasons why estate planning is essential:
Transfers Your Property According To Your Wishes
Many Americans use estate plans to determine who gets their property after their deaths.
Wills are the most frequently used estate planning tools, probably because they are the most straightforward, least expensive, and are more familiar than other solutions. The purpose of a will is to make your wishes known, and provide for the distribution of your assets and possessions among your family members.
A living trust is another prominent estate planning tool that can help you name the beneficiaries who you want to inherit your belongings. Living trusts (unlike wills) don’t have to undergo probate, which can save your loved ones time and resources.
Estate planning can also take advantage of strategies such as transfer-on-death designations/accounts, deeds, and registrations to pass possessions to beneficiaries upon death or incapacitation.
According to a LegalZoom 2020 survey, published by CNBC, 62 percent of Americans had wills, with about 12 percent having created theirs in the preceding 12 months. These Americans acknowledged that tomorrow isn’t promised. However, about 38 percent of Americans — around 126 million individuals — didn’t have a will at the time of the survey, and many of those probably still don’t. However, that’s probably because most people don’t understand the importance of a will (and of other tools such as living trusts). If you pass away without an estate plan in place to guide the distribution of your assets, Texas’s succession laws will govern how your property is distributed, and it may not be how you or your family wanted it. An estate plan puts you in control over what happens to the wealth and possessions you worked so hard to accumulate.
Preparing wills, living trusts, and other tools can be complex; Attorney Michelle E. Murphy can help you prepare valid documents to help beneficiaries divide your assets.
Provides Care for Young Children
One of the biggest benefits of an estate plan is that you can use it to appoint a guardian to raise your minor children if something happens to you and your co-parent. If an unfortunate event occurs, the person you appoint as their guardian will be able to care for your kids and make important life decisions for them, such as:
- investment/financial choices
- who the children live with and get to have in their lives
- religious upbringing
- medical choices
- the kind of education the children get
- social life choices
- & more.
If you don’t designate a guardian for your children, Texas laws will determine who they will live with and who will make decisions for them. This may not be the person you would have chosen; to protect your kids and avoid potential family conflict or stress for them, you need an estate plan!
Avoids Inheritance and Estate Taxes
Estate planning can help you limit taxes that you or your family would otherwise have to pay. According to Boston College via Forbes, Americans will transfer about $59 trillion through 94 million estates between 2007 and 2061. Beneficiaries will get around $36 trillion, and $5.6 trillion will be paid in federal taxes.
Texas doesn’t have an estate tax, but individuals with property originating from other states may have to pay inheritance or estate taxes. However, federal taxes may also apply on assets worth over the set thresholds. You can work with an estate planning lawyer to reduce tax obligations now and ensure your property’s beneficiaries aren’t surprised by taxes in the future.
Probate is the process by which a local Texas court legally distributes your estate to your beneficiaries after you pass away. The probate procedure is notoriously time-consuming, complicated, stressful, and expensive – it can cost thousands of dollars, depending on the court fees involved. Estate planning prevents this process from having to occur at all. If you have a trust, your estate can bypass probate and go directly to your family. Comprehensive estate plans can reduce the chances of your loved ones receiving a depleted inheritance and having to deal with tedious paperwork while they’re grieving.
Express Your Healthcare Wishes
An estate plan can be used to decide what your wishes are in regards to the type of medical care you’ll receive if you are incapacitated, or your end-of-life medical care. A healthcare proxy allows you to name the individual who can make medical choices on your behalf when you are unable to make them yourself. A living will (also known as an advance directive) can clarify what those wishes are, so your family members don’t have to wonder if the right decisions are being made. You can let your doctors and family members know:
- the medication that doctors or loved ones can give you
- medical procedures that doctors can perform to treat you
- the medical treatments the doctors can’t provide you in specific circumstances
- what lifesaving medical measures you do or do not want to be taken
A durable power of attorney gives someone the ability to make financial decisions on your behalf if you become incapacitated or aren’t able to manage your assets on your own. It’s advised to give power of attorney to the same person you designated as your healthcare proxy, to avoid potential disagreements over your well-being/medical care.
Manage Your Final Arrangements
You can include specific directions regarding your funeral and other final arrangements in an estate plan; instructions regarding what can happen to your body after your death (cremation, burial, donation), the types of memorials or ceremonies you want, and more. While you may nominate an individual to make these choices after dying, you can also leave comprehensive guidelines regarding your wishes. A Texas estate planning lawyer can help you organize these affairs to ensure you and your family have peace of mind.
Don’t Wait To Plan. Learn How Our Texas Estate Planning Attorney Can Help You Today!
Attorney Michelle E. Murphy has spent over 20 years helping Texas families understand the importance of estate planning and create comprehensive estate plans that are personalized to their needs. Her legal knowledge and experience allows her to draft effective wills, trusts, powers of attorney, health care proxies, advance directives, and other legal documents that can achieve your legal goals and preserve a lasting legacy! Call today to schedule a free consultation and begin the estate planning process.